KEY aspects of last week's major report on climate change will be rejected by the Federal Government.

These will include the treatment of petrol in a carbon emissions trading scheme, and compensation for electricity generators.

The Government is also determined to introduce a full cap-and-trade scheme from 2010, rejecting an earlier proposal from its hand-picked climate change expert, Ross Garnaut, that a transitional scheme with set-priced permits should operate between 2010 and 2012.

It is believed the Government's Green Paper, to be released next Wednesday, will canvass various options to compensate families for increases in petrol prices.

Professor Garnaut yesterday reiterated a key point of his draft report, delivered last week, that petrol should be included in an emissions trading scheme without off-sets.

"You want to include everything you practically can, and if you start making exceptions, there is no logical boundary to end the exemptions," he said on Channel Nine.

"Why exempt petrol any more than electricity or gas or a whole lot of things?" It's believed the Government's Green Paper canvassing policy options — said to rival Professor Garnaut's 548-page draft report in size and complexity — is all but finished, and ready for release on Wednesday next week.

This comes as a new scientific report confirms that Australia is already suffering the effects of climate change, with droughts predicted to occur twice as often and be twice as severe. Professor Garnaut opposes paying compensation to operators of coal-fired power stations for loss of profitability and asset values.

It is believed that Government support for generators will not take the form of compensation in cash or free permits, but will instead be directed at structural adjustment measures.

Climate Change Minister Penny Wong has promised measures to tackle the impact on the most affected industries, and not just those exposed to international trade. Another area of debate is the timing of introducing emissions trading.

The Government believes it should move directly to a full cap-and-trade scheme from 2010.

Under such a scenario, it is likely the impact on consumers would initially be modest, because Australia is already on track to meet its Kyoto obligations.

The Garnaut report had canvassed a phased introduction of emissions trading, with set-priced permits between 2010 and 2012. Last month, Professor Garnaut said this would be better than a fully fledged auction-based system, although in last week's report he downgraded it to a second-best option.

The Government faces a difficult time getting emissions trading through the Senate.

Family First senator Steve Fielding — one of seven senators holding the balance of power in the new upper house — repeated yesterday that families should be protected from petrol price increases.

"If petrol is included in the emissions trading system, we definitely need to offset the effects, because families are already buckling under the pressure," he told Channel Ten.

Yesterday, the Opposition warned against rushing to introduce the scheme.

It has said that a 2011 starting date would be more appropriate.

"We don't want to risk jobs or damage the economy just for the sake of the Prime Minister's timeline of 2010," Deputy Opposition Leader Julie Bishop told Sky News.

She also advised Professor Garnaut to stay out of the politics of climate change, after he again called for a bipartisan approach to policy.

"He says he's an economist, he's not an expert climatologist, he's not a politician," she said.

"He should stick to the economics of it all."

Professor Garnaut has also endorsed the Prime Minister's handling of the issue, and said Mr Rudd had the ability to sell climate change reform, showing "a lot of skill".